Cummins shareholders rejected a proposal to split the chairman and chief executive officer roles Tuesday during the company’s annual shareholder meeting.
The proposal, submitted by a Cummins shareholder, sought to divide the company’s chairman of the company’s 13-member board and CEO roles into two separate positions that would be filled by two different people.
If approved, the proposal would have stripped Chairman and CEO Tom Linebarger — who currently holds both roles — of his chairmanship.
Currently, it is unclear what percentage of investors voted against the proposal. Company officials did not provide detailed results during the meeting but said they planned to file the results with federal regulators following the meeting.
The filing was not made before press time.
The proposal argued that the chairman and CEO “are fundamentally different” roles and should be held by two different people, including a chairman who comes from outside the company.
Similar proposals have won the support of shareholders at other large companies in recent years, including Boeing Co. and Illinois-based health care company Baxter International in 2020.
A total of 45% of Standard & Poor’s 500 companies operate under a combined CEO/board chair structure, The Indianapolis Business Journal reported, citing the Council of Institutional Investors. Another 34% have both a CEO and an independent board chair, while 20% have a CEO and a non-independent board chair. The remaining 1% don’t have a board chair.
“With the current CEO serving as chair, this means giving up a substantial check and balance safeguard that can only occur with an independent board chairman,” the proposal states.
The Cummins board of directors recommended shareholders to vote against the proposal, according to a proxy statement filed with regulators.
The board pointed to the company’s performance, arguing there is no evidence suggesting that separating the two roles would improve the company’s financial performance or benefit shareholders.
The board further argued that it is “truly independent” and has an independent lead director “with the authority to ensure proper checks and balances.”
Linebarger and President and Chief Operating Officer Jennifer Rumsey are the only Cummins executives on the company’s board. The other 11 members come from outside of the company.
“While our board believes that there may be circumstances which warrant separation of our chairman and chief executive officer roles, our board currently believes it is in the best interests of our company for the roles of our chairman and chief executive officer to be combined and to appoint a lead director from among our independent directors,” Cummins said in the proxy statement.
Similar proposals were voted down in 2019, 2015 and 2013.
Additionally, Cummins investors voted in favor of electing the 13 board of directors nominated by the board, including Linebarger and Rumsey.
Story by Andy East, The (Columbus) Republic